Reward Management in McDonald's: Challenges and Recommendations

This report discusses the reward management systems of McDonald's, identifies current practices and challenges, and recommends effective approaches to address the issues. The challenges include comprehensive reward structure, low motivation, and low customer satisfaction. The report recommends implementing performance-based reward structures to address these challenges.

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Running head: REWARD MANAGEMENT

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Contents
Introduction...........................................................................................................................................2
Discussion..............................................................................................................................................2
Conclusion.............................................................................................................................................7
References.............................................................................................................................................8
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Introduction
Reward management procedures are generally established on reward philosophies and
approaches and covers arrangement in the form of policies and approaches, guiding
principles, practices as well as reward management structure. In this report reward
management systems of McDonald have been discussed through identification of their
current practise as well as challenges related to reward system and then recommending
effective approach to develop strategies that can address issues that have been identified.
Discussion
According to Business Premium Collection (2016) McDonald’s is a reputed brand in fast food
industry across the world and its operates in over 100 nations. Generally their approach is
establishment of franchise system to expand the business and over 90% of their business are
owned and operated with franchisees. The main activity of McDonald’s is serving locally
preferred fast food items and beverages with sharp focus on maintaining quality and is
offered to customers at different price points. As stated by Azim and Azim (2012) the
popularity of McDonald’s has been retained due to their business strategy that focuses on
building brand strength through quality standards and wide range of food choices being
extended to almost all markets globally. Also adaptation of food offerings and services
according to preferences of geographies depending on localisation of food menus with local
taste and preferences is also key business strategy of McDonald’s. Though the food offered in
different geographical markets are localised but they still offer by and large some
standardised menus. According to Mangelsdorf (2012) aanother strategy of McDonald’s is
their focus on innovation where they regularly experiment with new product and flavours to
bring exciting menus in market and they have consistently maintained their competitive edge
with focus on affordable pricing, quality of food, customer convenience and innovation in
flavour.
Further McDonald’s currently has nearly 235,000 employees globally and they are equally
responsible for their employees and offers them equality at work based on merit. Also as
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stated by Komanda (2015) McDonald’s maintains sharp focus on developing their employees
as future leaders and rewards them according to their contributions and achievements. Their
existing reward management system is based on characteristics of team behaviour where a
comprehensive reward structure is practised currently at McDonald’s that makes the firm
acknowledge the advantages of establishing goals for entire team and not just for one
employee. According to Spector (2013) in their current reward management system while
some members of the team may dislike doing more work as compared to other members but
over time it is ensured that each member should lend their efforts in ratio to their
compensation. This is because of the fact that McDonald’s strongly believes in team that is
formed of properly skilled individuals with diverse background and experience so that
together they could work with high sense of commitment to respond effectively to maintain
organisational goals in highly competitive environment. As such success of overall team is
vital for comprehensive reward structure that is practiced within McDonald’s. According to
Komorowski (2016) some other characteristics that shapes McDonald’s reward management
system and related decisions include individual employee factors, size of team, organisational
structure and environmental elements. Individual factors like personality, education impacts
reward system like for instance some individual may respond better with extrinsic motivators
like financial rewards like incentives, promotions while others may respond to intrinsic
motivation like working in team which help them to attain personal satisfaction. Hence
individual motivational drivers has correlation with rewards and accordingly on their design
systems. Other characteristics of reward management system of McDonald’s is composition
of team size, skill level that influences design system of rewards. For example as teams
advances through stages of development like forming, storming, norming and performing
McDonald’s systematically offer rewards aligning to stage of team development that
motivates members of teams to engage in team work, lends to productiveness and solves the
procedure of improvement concerns. McDonald’s for instance offers medals or awards when
teams are formed initially to motivate members to get involved in activities as well as engage
with one another effectively which normally drives to productiveness in later stages. Further
as stated by Uggla (2014) culture, industry and structure of organisation also shapes
characteristics of McDonald’s reward management system approaches where for instance
their corporate culture implements desirable rewards like offering monetary incentives, perks
like free food, event voucher etc to members in team as reward for their contributions. Lastly
environmental elements such as government norms, economic situation and competitive
elements are characteristics of reward system at McDonald’s which normally governs the
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frequency and amount of reward that can be offered to team members. Moreover retention
rate of team members also shapes reward systems of McDonald’s where compelling reward
options are eventually decided based on evaluation of retention ratio and decisions are made
on manner to reward teams likely with either money, award or with time off.
According to Martin-Perez and Martin-Cruz (2015) Reward management is basically about
designing, executing, maintaining, communicating and evolving the process of design system
of rewards that can assist firms to improve their performance as well as attain their goals.
These are developed and maintained to offer and administer adequate forms and levels of
pay, benefits and other kind of rewards and these consist of financial and non-financial
rewards.
According to Marcela Lage Monteiro et al. (2016) it has been commonly identified that the
primary challenges or issues that are faced in reward management systems includes ensuring
if the reward management approaches are actually supporting attainment of organisational
business tactics and fulfilling the needs and desires of employees towards security, stability
and career progression. Others challenges that are generally faced even includes
understanding the manner for achieving internal equity and external competitiveness and then
incorporating such aspects effectively in designing of reward structures as well as evaluating
actual response adequate to fragmented pay markets to maintain a reasonable and coherent
pay structure. Further on going deeper into various literature it has analysed that interpreting
the manner an organisation can actually reward individual performance and efforts as well as
promote teamwork eventually is often a challenge. Based on these understanding it has been
analysed that McDonald’s current Reward management systems has some specific challenges
or issues which are as follows:
Issue 1: currently McDonald’s practices comprehensive reward management structure where
rewards are more driven on contribution of overall team than on individual employee’s
contribution. As result of this approach staffs often feel less motivated. Also many high
performer staffs often complain that they lose motivation because due to comprehensive
reward structure of McDonald’s it has been normally observed that low or average
performers are similarly rewarded as their high performing counterparts which has resulted
into situation where only some members of team have to regularly do hard work to drive
overall team performance so as to get adequate rewards while few low performing members
also enjoy equal reward benefits even when lending less efforts (Garavan, Carbery & Rock
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2012). This has resulted into low motivation in high performers as they feel they are not
adequately rewarded or recognised and get the same incentives or acknowledgements as low
performing team members. Quality staff are also frustrated to work more continuously so as
to cover up for team members who are regularly late at work or do not respond as expected
to customers in timely way.
In order to address this situation of challenge within the existing reward management
structures of McDonald’s they need to change their approach from comprehensive reward
structure to performance based reward structure where individual performance are given
precedence over entire team performance. In the period of competitiveness and changed
aspects of environment more firms today show high level of commitment for reinforcement
of new reward practices that are competitively aligned with other HR approaches as well as
overall organisational aim to attract, retain and motivate high performing employees. As new
reward management practises like performance base reward structure are more effective in
attracting result driven employees who can adapt and succeed in performance based current
environment so it is vital motivation aspect and more effectively lends toward increase of
productiveness of high performers when executed appropriately (Neeti & Sharma 2014).
Hence with change in exiting reward practices through incorporating performance linked
rewards McDonald’s can bring in more effectiveness in their reward structures and
approaches by linking it with performance development systems. This will help to practically
respond to expectations of high performer employees where they can see real contrast and
acknowledgement for their hard work through performance linked pays that will help them
get more incentives which are not same as that given to all in general even to low performers
which is being practiced as of now under comprehensive reward systems. Also performance
linked reward will give more opportunities to build a competitive and healthy work
environment as variance in rewards will actually play a vital role in motivating performance
of employees specifically high performers instead of giving them a fixed standard reward
packages. Reward approaches like gain/profit share, employee stock ownership plans will be
helpful to deal with exiting issue identified in McDonald’s respective to their existing reward
management systems.
Issue 2: according to Altuna et al. (2017) comprehensive reward management structure
currently practiced at McDonald’s has brought about issues in low customer satisfaction with
some of the customers registering complaints about employees attitude and commitment for
task in hand where some have been observed as being more interested in talking to their
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friends than handling the customers during their work schedules. Such situations or
challenges have emerged because under comprehensive reward systems the overall
performance of team is assessed and acknowledged so it has made some of the employees
laid back in their attitude and commitment to their tasks in hand. This on other hand has
resulted some high performers facing more constant pressure to cover up for low performers
in an attempt to meet with overall team performance which has led to frustration amongst
high performers while on other side low performers dragging their baggage over shoulders of
others in absence of adequate measures that can instil sense of ownership among them as
equal to high performers to boost their performances and contributions. This challenge can be
responded with implementation of more effective administration of reward system that can
have beneficial impact on performance equally in different manner and amongst all
employees to promote long term focus with continued improvement of low performers that
can even lower operational costs, facilitate team work, reduce dissatisfaction in employees
and boost their interest (Schiemann & Ulrich 2017). As such modern approaches of reward
management like performance linked pay can bring in essential transformation in attitude of
employees thus enhancing their interest in financial performance of McDonald’s so that
benefits like profit sharing can be received in form of reward practices. Also it will be
rewarding as low performers would get interested to change their attitude to attain new skills
which may add value to overall organisational performance as well as even add benefits to
their own rewards structure thus aligning competitive expectations with organisational
performances as well as individual performance and even facilitating overall team
performance to attain long term benefiting outcomes and wining overall employee
commitment more equally within organisation.
According to Bosua and Venkitachalam (2013) as reward can be primary source for
motivation of employees so these must be governed with right conditions aligning to changes
and expectations of rising competitiveness in environment so that highly skilled resources are
retained and simultaneously improvement can be administered for even low performers under
more appealing and effective reward management approaches. One of the modern approach
of reward systems is performance based reward and pay benefits as these are linked to
variable pays depending on individual performance. As such these are seen to drive better
performance not only amongst high performers but also low performers as a visible contrast
can be seen in reward practices where some of the approaches like gain or profit sharing of
organisation based on individual level of performance are appealing enough to drive
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motivation to perform equally among all employees (Baird, Su & Munir 2018). Hence it is
recommended that McDonald’s redesign their comprehensive reward systems to performance
linked rewards systems so as to drive effectiveness through link between reward and
performance with more relevant reward values for employees. Example, reward management
practitioners at McDonald’s can address the concerns related to existing reward systems by
developing more competitive and holistic approach through implementation of performance
linked reward systems that are efficient not only to hold good resources but also helps to
check out unexpected outcomes of administration of reward practices by adding relevance
and value to reward practices. For instance, McDonald’s can provide profit sharing to top
executives based on firms overall performance whereas for frontline staffs they can offering
earning bonuses on basis of sales or targets attained in outlets to ensure effective reward
management strategic approach.
Conclusion
Hence from the discussion it has been inferred that financial rewards elements of reward
management systems commonly integrates practices and process of tracking market rates,
evaluating value of jobs, developing and administering pay structure, paying rewards based
on performance, expertise and competency and offering employee perks accordingly. Also
reward management is not only limited to monetary forms but even comprise of non-
monetary rewards that offers intrinsic and extrinsic motivation. Hence depending upon
identified goals of organisation and needs or expectations of employees an appropriate
reward systems can bring in desirable outcomes as well as support in retaining top talents.
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